A budget is an estimation of savings and expenditure. You might think that producing a budget might not be the most exciting thing, but it is one of the most vital things. In other words, though you might not have fun making a budget, you have to do it f you are to keep your finances in check. However, if you have not produced a budget before, doing so for the first time might be a little challenging, unless you have some help along the way. The first thing you need to know about producing a budget is that you need to provide as much information as you can. At the end of the whole process, your budget should reflect how much money you have coming and from where, and how much you are spending and on what. Below are a few steps to help you produce a good budget.
- The first step to producing a budget is to gather information. Collect all your financial statements and this includes investment accounts, bank statements and utility bills. Collect any statements that show how you have been spending your money recently and those that reflect any payments or money coming in. The whole essence of gathering all these statements is to come up with an average of how much money comes in a month and how much you spend in the same month.
- The second thing that you need to do is to record all the information that you have gathered. Record all your income sources as well as monthly expenses. If you get your income from a monthly check, make sure you reflect how much money is on the check and deduct any taxes or fines. In case you are self employed or have another source of income, make sure that this is also reflected. Your list of expenses should include anything that you intend to spend your money on, for example car insurance, mortgage, utilities and groceries among others.
- It is recommended that you break your expenses into the categories of fixed and variable. Fixed expenses are those that stay the same every month, while variable expenses are those that keep fluctuating. Fixed expenses are usually constant and non adjustable, whole variable expenses can always be cut down.
- The last step to producing a budget is to total all your expenses and income. In case your income is lower than the expenses, you will need to make a few changes.